Clerk, Walker & Stops and Clerestory Pty. Ltd. v. Commr. of Pay-roll Tax (Tas.).

Judges:
Cosgrove J

Court:
Supreme Court of Tasmania

Judgment date: Judgment handed down 13 September 1983.

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Cosgrove J.

On 28th September 1979, the Commissioner of Taxes advised Messrs. Clerk, Walker and Stops, a legal firm with offices in Hobart, that acting under the provisions of the Pay-roll Tax Act 1971 he had determined that Clerk, Walker and Stops and Clerestory Pty. Ltd. should be grouped as ``associates'' under the provisions of sec. 9A of that statute. On 9th October 1979 the two appellants objected to the determination. On 22nd April 1980 the Commissioner of Pay-roll Tax disallowed the objection. By notice of motion dated 13th May 1980 the appellants appealed to this Court against the decision of the Commissioner disallowing the objection. The right of appeal to this Court is given by sec. 33 of the statute which provides that the notice of appeal should be in the prescribed form. By Statutory Rule No. 140 of 1976, it was provided that an appeal should be in the form of a motion to the Supreme Court. Section 33 confines the appellant to the ground stated in his objection, and also provides that on the hearing of an appeal, the Supreme Court shall proceed in accordance with the Rules of Court, and shall make such order on the appeal as it thinks fit, with respect to any determination of the Commissioner that is the subject of the appeal. It appears that no Rules of Court have been made governing appeals of this nature.

Mr. Norris, for the respondent, submitted that the appeal was an appeal sensu stricto, and relied upon the decision of the Full Court of the Supreme Court of Queensland in
Commr. of Pay-roll Tax (Qld.) v. John French Pty. Ltd. & Ors. 83 ATC 4283; the decision of Mr. Justice Gray of the Supreme Court of Victoria in
The Ballarat Brewing Co. Ltd. v. Commr. of Pay-roll Tax (Vic.) 79 ATC 4452; and Mitchell J.'s decision in
Commr. of Stamps (S.A.) v. Rivington Farms Pty. Ltd. 81 ATC 4449. Mr. Somhee for the appellants made no submission on this aspect of the case. Despite the authorities referred to by Mr. Norris, I am not satisfied that it is in fact an appeal sensu stricto, and I refer to
F.C. of T. v. Finn (1960) 12 A.T.D. 249 at pp. 250-251; (1960) 103 C.L.R. 165 at p. 167, per Fullagar J. It seems to me that this is clearly an application to the Supreme Court in its original jurisdiction, which would tend to favour a re-hearing, and although one aspect of the case deals with the question of the ``satisfaction'' of the Commissioner, other aspects deal with pure questions of fact. However that may be, it is probably of no importance in the instant appeal because the parties placed before me an agreed bundle of documents, an agreed statement of facts, and made joint concessions during the course of the hearing. No attempt was made to call fresh evidence, and no objection was taken to the statement of facts made to me by Mr. Southee on behalf of the appellants.

The determination of the Commissioner, to which the appellants object, arose in this way. Section 9 of the Pay-roll Tax Act 1971 provides, in rather a complicated form, for deductions from the amount of taxable wages to be made in respect of small businesses. However, sec. 9A provides that the deduction shall not be allowed in respect of a ``group''. A ``group'' is a ``group of employers'', and contrary to the view taken by all the parties to this appeal, does not come into being as the result of a determination of the Commissioner. Section 9A(1) of the statute provides:

``... for the purposes of this section, the employer, the related persons and the associates are together called a `group' and the employer, each related person and each associate is a member of that group.''

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ATC 4596

The constitution of those persons as a ``group'' depends upon the existence of the following facts -

• 1. the relation of one company to another;
• 2. the performance of duties for, or in connection with the trade, business or profession carried on by one employer and another person by an employee of another member of the persons to be constituted a group; or
• 3. the employment solely or mainly for the performance of duties for or in connection with the trade, business, or profession of one employer by an employee of another employer; or
• 4. the existence of an agreement by an employer in respect of the performance of duties by one of his employees with another person relating to a trade, business or profession carried on by that other person.

If one of these facts exists, then unless the employer satisfies the Commissioner that the trade, business or profession in which the employee is employed is carried on independently of, and is not connected with, the carrying on of a trade, business or profession carried on by the associate, the group exists. Presumably, when the Commissioner referred to his determination he intended to be understood as referring to his decision that he was not so satisfied.

I set out now the agreed statement of facts:

``1. The appellant [this refers to Clerk, Walker and Stops, who were the only appellants until Clerestory Pty. Ltd. was added during the hearing] is a partnership of solicitors carrying on a legal practice at Hobart.

2. The appellant and Clerestory Pty. Ltd. carry on business at the same address. Clerestory Pty. Ltd. provides as part of its services premises for the appellant and also lets part of the premises to insurance companies at 111 Macquarie Street, Hobart.

3. The four partners in the appellant firm are the same persons who are the four directors and shareholders of Clerestory Pty. Ltd.

4. Clerestory is a mortgage nominee company and trustee company in that it holds property on behalf of clients. It is a service company to the appellant and renders services for reward to the appellant such as the provision of office equipment, partitioning and furniture. It also acts as an agent in Tasmania for business names for firms outside the State and was under the Companies Act 1962 a registered agent for foreign companies. It now under the Companies (Tasmania) Code provides an address for service for such companies.

5. The appellant and Clerestory each employ their own staff who are distinct from each other.

6. Clerestory Pty. Ltd. charges the appellant service fees and charges for the use of the premises, partitioning, equipment and furniture and all staff salaries and wages.

7. Clerestory provides the appellant with services by way of staff, equipment and premises and is paid for such by the appellant. The employees of Clerestory Pty. Ltd. wear separate uniforms from the staff employed by the appellant.

8. Distinct and separate accounts are kept by Clerestory Pty. Ltd. and the appellant.''

By way of explanation of the expression ``all staff, salaries and wages'' which appears at the end of para. 6, I was told, by consent, that Clerestory Pty. Ltd. provides Clerk, Walker and Stops with typists, account clerks, accounting machinists, receptionist/telephonist, filing clerks; but that all staff such as practitioners, apprentices, conveyancing clerks, accountants and probate clerks, are provided by Clerk, Walker and Stops. I was further told that there is no written agreement between Clerestory Pty. Ltd., and Clerk, Walker and Stops. It was agreed that the right to hire and fire all the staff supplied by Clerestory Pty. Ltd., to Clerk, Walker and Stops remained with Clerestory Pty. Ltd., and that Clerestory Pty. Ltd., could, at any time, detach one member of the staff and provide another in his or her place, but that the day-by-day direction of staff to their duties resided in the partners of Clerk, Walker and

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ATC 4597

Stops. I was further told that I had all the information before me that the Commissioner had.

I now set out a truncated version of sec. 9A of the statute:

``9A(1) A reference in section 9 to taxable wages does not include a reference to any wages paid or payable by an employer -

• ...
• (c) where -
  • ...
  • (ii) the employer has, in respect of the employment of, or the performance of duties by, one or more of his employees, an agreement, arrangement or undertaking, whether formal or informal and whether expressed or implied, with another person (which other person is, in this section, called an `associate') relating to a trade, business or profession carried on by the associate or by the associate and another person -
• unless the employer satisfies the Commissioner that the trade, business or profession in which the employee is employed is carried on independently of, and is not connected with, the carrying on of a trade, business or profession carried on by the associate (whether or not with another person) -

and, for the purposes of this section, the employer, the related persons and the associates are together called a `group' and the employer, each related person and each associate is a member of that group.''

So far as subpara. (ii) of para. (c) of subsec. (1) of sec. 9A is concerned, a simple issue of fact arises as to whether there was an agreement, arrangement or undertaking between Clerestory Pty. Ltd. and Clerk, Walker and Stops in respect of the performance of duties by one or more of Clerestory Pty. Ltd's employees relating to a profession carried on by Clerk, Walker and Stops. Mr. Southee quite rightly contended, and it was not contested, that Clerestory Pty. Ltd. and Clerk Walker and Stops have separate identities, and the separation of their identities is not diminished by the fact that the same four persons control both the company and the partnership. The very fact that they are separate, of course, leads to the inescapable inference that the company would not provide the partnership with staff unless there was some agreement covering the terms and conditions upon which the staff would be supplied. The same considerations apply to accommodation, furniture and so on. But Mr. Southee contended that the agreement did not cover the performance of duties by employees relating to a trade, business or profession. He said that because Clerk, Walker and Stops were engaged in the pursuit of the legal profession, the activities of the typists, account machinists, receptionist, etc., did not relate to that profession, but merely to the subsidiary mechanical tasks which the pursuit of the profession required to be done. In my opinion there is no substance at all in this argument. A typist who types a writ or a deed or a mortgage can hardly be said to be performing duties which are not related to the practise of the legal profession. The typist is not, herself, of course, engaging in the practise of the legal profession, but the performance of the duties which she is called upon to carry out surely relate to the practise of that profession.

The next question is whether the Commissioner ought to have been satisfied (or depending upon the nature of the appeal, whether I ought to be satisfied) that the business in which Clerestory Pty. Ltd. was engaged, and in which its employees were employed, was carried on independently of, and unconnected with, the carrying on of a profession by Clerk, Walker and Stops. The agreed statement of facts makes it plain that Clerestory Pty. Ltd. was the landlord of Clerk, Walker and Stops and that it also let part of its premises to insurance companies; that Clerestory Pty. Ltd. was a mortgage nominee company and trustee company of a sort; and that it was an agent in Tasmania for business names for firms outside the State, and an agent for foreign companies. The company thus had the right to determine who would occupy that part of its premises which were not occupied by Clerk, Walker and Stops. Given that the four partners in Clerk, Walker and Stops were the sole shareholders

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ATC 4598

in the company, it would seem to me to be naive to infer that the operations of the company in respect of the letting of the parts of the building adjacent to the partnership would not be influenced by the shareholders in such a way as to maximise any advantage to the partnership. Again it would seem to me to be naive to infer that the operations of the company, as an agent in Tasmania for business firms and foreign companies, would not become the subject of communications which would in some way advantage the partnership. Further, in the absence of evidence to the contrary, it would seem to me to be not unreasonable to infer some link between the investment policy of the partnership and the investment policy of the mortgage nominee company. Further still, it would seem to me to be not unreasonable to infer that the profits to be made by the company, and the profits to be made by the partnership, would be a matter for common consideration by the four persons who controlled the company and the partnership, and that the charges to be made by the company to the partnership would be fixed, bearing in mind the interests of the company, and the partnership, and those who controlled both. It may have been possible to show that, despite the apparent common interest of the company and the partnership in these matters, the business of the company was carried on independently from the practise of the profession by the partnership. But that was a matter upon which the company and the partnership carried the burden of proof before the Commissioner and if this is a re-hearing, the burden of proof before me. In my opinion that burden of proof was, on the evidence, not discharged. I do not find that the Commissioner erred. The appeal is dismissed.